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Rupee hits all-time low on importer dollar demand

Rupee hits all-time low on importer dollar demand

Reuters: The Sri Lankan rupee touched its all-time low yesterday (14 March) as importer dollar demand surpassed mild selling of the greenback by exporters, dealers said.

The rupee touched an intraday low of 155.90 per dollar, matching the all-time low hit on 14 February, before closing at 155.85/95, compared with 13 March’s close of 155.70/75.

“There was importer (dollar) demand. We have seen some foreign banks were also buying dollars. Exporter dollar conversions were very thin,” said a currency dealer. “We won’t see much exporter conversions until late March.”

The rupee has weakened 1.56% so far this year after declining 2.5% last year and 3.9% in 2016.

It is expected to be pressured by continued importer demand for dollars ahead of the traditional New Year in April, dealers said.

A gradual depreciation in the rupee and higher volatility this year are expected on account of debt repayments by the government, they added.

The International Monetary Fund on Friday (9 March) said Sri Lanka’s economy remains vulnerable to adverse shocks due to its large public debt and low external buffers.

The government must repay an estimated Rs. 1.97 trillion ($12.68 billion) in 2018 - a record high - including $2.9 billion of foreign loans and a total of $5.36 billion in interest.

Foreign investors sold government securities worth a net Rs. 3.2 billion in the week ended 7 March, Central Bank data showed.

Dealers also said a communal violence in the central district of Kandy weighed on sentiment.

Police said on Friday (9 March) they were investigating whether 10 suspected ringleaders of a wave of attacks on Muslims by Sinhalese Buddhists had outside funding or foreign help.

After five days of violence, police said the situation has calmed down and the curfew lifted since Saturday (10 march) in Kandy.

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